Treasury Bills or T-bills are short-term financial instruments (debt instruments in this case) with a maturity period of less than a year. T-Bills are auctioned by the Reserve Bank of India at a discount to par value and are used by investors to invest their surplus at very low risk compared to other investment like stocks. T-Bills are used by Government to acquire capital to fund the various operations when needed.
T-Bills have zero-coupon rates, i.e. no interest is earned on a T-Bill investment. Rather T-Bills are purchased at a discount to par value from RBI and the RBI promises to pay back the entire face value at the time of maturity. Based on the time of maturity, RBI auctions 14-Day and 91-Day T-Bills every week on Fridays whereas 182 and 364- Day T-Bills are auctioned every alternate week on Wednesdays.
Suppose an individual purchases a 91-Day T-Bill with a face value of Rs.100 at a discount price of Rs.92. Then at the time of maturity (i.e. 91 Days), RBI pays back the T-Bill holder Rs. 100, thus resulting in a profit of Rs.100-Rs.92 = Rs. 8 for the individual